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Jefferies' Thilo Wrede warns investors not to get too excited about a potential Pepsi (PEP...

Jefferies' Thilo Wrede warns investors not to get too excited about a potential Pepsi (PEP +0.7%) for Mondelez (MDLZ +1.1%) deal, despite pressure from Nelson Peltz. Although such a move might look accretive, appearances can be deceiving, and Wrede doesn't think such the proposal is consistent with either firm's plans.
Comments (7)
  • Historically, Frito Lay has done an excellent job of dominating their sector(s) with a relatively few, high powered brands. MDLZ is more of a grouping of smaller, less commanding labels. Although both provide higher quality products, there is apparent variance in how they have been managed. Additionally, Frito has little recent experience incorporating acquisitions. However, if Frito management were to see the value in substantial growth for even a few of the MDLZ labels there should be great interest in the opportunity.
    18 Jul 2013, 11:00 AM Reply Like
  • It's true that MDLZ has a lot of smaller brands, 52 that each generate 100M+ annually. Additionally, $MDLZ has 9 billion dollar brands in the portfolio. Frito-Lay, correct me if I'm wrong, has 8 billion dollar brands. The reason I think it's a solid fit, is there is very little that either have in each others categories.
    18 Jul 2013, 11:16 AM Reply Like
  • Not sure that all of MDLZ's products are "smaller, less commanding labels" ... Oreo certainly controls considerable share in biscuits, while Cadbury (although licensed to HSY in the US and thus not especially top of mind to American investors) is a major global chocolate confectionery player.
    18 Jul 2013, 11:15 AM Reply Like
  • KO should buy MDLZ for $38. Both companies will flounder otherwise. KO needs to kick the door down in all the 3rd world countries. Take the gloves off and monopolize the entire sugar, fat, salt, and caffeinated food and beverage business.

     

    As the middle class expands in Asia and Latin America I want these people eating and drinking 24 / 7. Go to the jungles; go to the mountains; go to the deserts and the lands of snow and ice. As developed nations cut back on sinful products we must introduce the entire 3rd world to the pleasures of tooth decay and obesity.
    18 Jul 2013, 04:14 PM Reply Like
  • After listening to Peltz interview I found it very interesting in how he crafted it to give people the information that he wanted them to hear that was bad but yet he could not be blamed for misinformation. The most glaring example of this was Peltz talking about the snack business in Europe. Saying that Frito was not a large player in Europe and yet Mondelez was big in Europe. This is a true statement at surface value if you are just looking for the name of frito lay on a bag, but what he fails to mention is that Frito is not the main brand in Europe. Pepsi has Walkers Chips which is a dominant snack company in the UK, in addition through their power of one selling Pepsi has a very good snack business in Spain and Western Europe but not under the Frito name. Second point is that Peltz hits Pepsi on the carbonated beverage business which is in the decline. Yet fails to mention that Indra has worked Pepsi into a position to have one of the best non carbonated drink businesses which is growing. Just look at brands like Gatorade and Naked Juices and the Tropicana business which is large in the US but is also one of the main brands you see throughout Europe. The non carbonated beverage portfolio is very strong even if CD is declining. But lets not forget that while CD is declining it provides a lot of cash. Which is what Mondelez is missing at the moment in dealing with Peltz among other problems.
    Mondelez struggles to compete in Europe in both candy and snacks. The chocolate side of the business has always had trouble competing against Nestle and the private ownership of Mars, Hershey Trust and Ferrero. This was never a good purchase by Kraft.
    Not a fan of Peltz. Great for short stock gains. But for looking for the long term portfolio he has not done right by stock holders or companies. Pepsi has done well for me and yeah would not like to see that change. But I feel people really need to understand the facts of Pepsi which is a very strong company in many countries but its not always under the Pepsi or Frito name. I also have a lot of Kraft stock from the days of PM ownership and while that has done ok from the split. Lets face it, it will remain in that same $$ for a while and Mondelez is just a non player. After losing its cash machine of the old Kraft much like what Peltz is proposing about Pepsi things have not been great. What I find interesting about Mondelez now is that Irene said time and time again that the dividends that Kraft was paying was such a drain and was one of her reasons for a split. However now Mondelez is paying dividends......
    18 Jul 2013, 06:12 PM Reply Like
  • The fit with PEPSICO is just the snack business. Frito's down the street, (convenience store), with same driver/salesman is booming. What is missing are the key Nabisco brands. NABISCO could never make this work. Secondly, NABISCO's DSD business, (1 truck going to many stores with different sales reps merchandising), for supermarkets is perfect for Frito Lay. This would eliminate many small unions that Frito dislikes and enabled them to work with larger but fewer unions across the country. Nabisco has many large warehouses across the country and Frito products could easily fit in them to be shipped out. There are many synergies between the two companies which would provide significant cost savings. Irene needed to sell off the Pizza business so she could buy pass Warren Buffet to split from Kraft. Nabisco was a cash cow for Kraft. I believe there are plans being discussed to sell off many of the MDLZ brands especially the candy/gum portion as they would warrant a good price. Remember, Irene came from Frito Lay.
    20 Jul 2013, 10:15 AM Reply Like
  • Again a very US view. The beverage/snack business is much more integrated in the rest of the world which is what Peltz steered away from in his talk. In Russia Pepsi beverages go on the same trucks as the snacks. Irene needed to sell off the Pizza business because she needed the cash and it was clearly Nestle's asking price for staying out of the bidding of Cadbury. Nestle had been wanting the Pizza business for quite a while and was able to use that opportunity to get a excellent price for it from Kraft.
    20 Jul 2013, 02:08 PM Reply Like
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